Mad as Hell and Filled with Night Terror—Investing by Last Book Read
I’m sending a lump of coal to my financial adviser. Are you sending one to yours?
I’d like to know how stocks purchased over a year ago, like Citibank (C) or Radian Group Inc (RDN) or Irwin Financial Corp (IFC), could have been allowed to plunge to under $10 a share (now $7.22, $2.38 and $1.59, respectively) and still be in my portfolio when I had a smart, seasoned financial adviser watching — someone to whom I paid a percentage of my account not only to be there for the good times, but to protect and insulate me from the bad times. Have you asked yourself and your stockbroker that question, too?
NO, I said. I do not wish to continue to reinvest. I want out.
But this was months ago, and by the time I unceremoniously yanked my account and relocated it to Ameritrade, it was really too late. Yet, even as the bottom continued to fall out of the market, “hang on, this too shall pass” emails kept arriving from my now former financial adviser. Three months later, I’m am waking up in the middle of the night screaming in terror. 
For several years I’d been gingerly investing in the stock market. I didn’t really understand it, but I had some money in one of the Oakmark mutual funds and was doing pretty well. Then I read The Brainwashing of the American Investor—The Book that Wall Street Does Not Want You to Read! by Steven R. Selengut. This is a print-on-demand, self-published book a mutual friend of mine and the author asked me to take a look at about five years ago. There was information contained in the book that was forthright and made sense to me. Of course, the goal of any book of this genre is to tell people how to invest, then hope those people with real money will realize they don’t have the time to handle their own accounts, and will end up investing with the author.
I studied that book, read every page slowly and carefully, and took notes. And I was just getting the hang of investing when I began a consulting job at B&N Books and that awful Bela Szigethy, partner in Riverside Company in New York vs. Lynne Scanlon lawsuit started to look like it was going to end in a nasty trial by jury. Working for B&N and defending myself from the lawsuit were taking up every spare minute I had, so I bailed on handling my own account and passed it to a financial adviser.
Las Vegas on Wall Street!
Here’s what the amateur investor doesn’t get from reading books about investing in the stock market: It’s a crapshoot with featherbedding at the highest levels of corporations and Washington politicos. Period. It’s Las Vegas on Wall Street, and you know the guys drinking champagne and peering down from the hidden executive suites aren’t the REAL losers at the close of Wall Street each day when times get bad.
I recently asked a friend of mine who is very knowledgeable about investing on Wall Street if there was a book out there that could have saved small investors from the nosedive into the financial abyss. I guess not. (Do you know of one?) He did, however, send me an article written by Michael Lewis that appeared recently in National Business News and another one written by Niall Ferguson that appeared in Vanity Fair. THESE ARTICLES TELL YOU EVERYTHING YOU REALLY NEED TO KNOW ABOUT WALL STREET.
Hah! The first thing I was told in an advanced financial management course (Jeez, I got an “A”!) was that every move the management of a public company makes MUST be in the best interest of the stockholder. Moi! I’m drinking bitter coffee these days.
Of course, I also know that nothing would make financial advisers and stockbrokers happier than to report that their clients were unscathed, or only moderately scathed! Instead, the people in charge of your portfolios and pensions are singing the blues and pleading for understanding: “I didn’t know the sky was REALLY falling!”
My former financial adviser is still optimistic, sending those emails: “Don’t worry, as long as you’re diversified. Good companies will bounce back . . . in January!” I hope he’s right because if he is not, I think every investor whose portfolio is on life support should pack a suitcase and show up at the still-beautifully-holiday-wreathed front doors of the mega mansions owned by financial advisers, brokers, CEOs and board members of the companies that let us all down.
December 3rd, 2008 at 4:20 pm
[...] Originally posted [...]
December 3rd, 2008 at 4:30 pm
At least you had a portfolio!
December 3rd, 2008 at 4:41 pm
[...] Vote Mad as Hell and Filled with Night Terror—Investing by Last Book Read [...]
December 3rd, 2008 at 5:13 pm
[...] Vote Mad as Hell and Filled with Night Terror—Investing by Last Book Read [...]
December 3rd, 2008 at 7:14 pm
The only book reference I can think of that’s remotely germane:
“Every victim was a culprit, every culprit a victim.”
Joseph Heller, Catch 22
Note from the Wicked Witch of Publishing (TM): Check out Dave’s new web mag, 3rdActs.com. The target audience is age 50+. Smart people are contributing.
December 4th, 2008 at 3:57 pm
Dear Lynn Scanlon,
Fascinating information.
My books are up in a number of places, certainly Amazon and Google.
Will have to read more closely.
December 4th, 2008 at 5:04 pm
Invest in what you know about. Most people, myself and my wife included, do not know squat about stocks or much about most companies. And, frankly, I am not interested in learning.
So. Invest in what you know about. I’m a professional artist and we have bought a lot of work by others over the years–and traded my work for others’–and the value has held or gone quite a ways up. We know what we’re looking at. I wouldn’t invest in the stock market any more than I’d invest in race horses or breeding cattle. I don’t know anything about it.
My wifes has lost hundreds of thousands of dollars investing in her 401ks etc. It’s all now nearly worthless. A good thing we’ve been acquiring art. Art may go down the tubes, too, but we’ll certainly have enjoyed it more than Nortel or Enron stock.
Art. An investment you can see every day.
December 6th, 2008 at 10:34 am
Well, there were many people warning about exactly this all through the Reagan years, all through the Republican “Contract with America” years, and all through the Bush years. Too bad the people warning about things were cast into the toxic label of “anti-war” and “libruls.” Uh-huh. The term hook-line-&-sinker comes to mind.
One thing not mentioned, of many, is that Conservative ideology does not have a Middle Class in it. Or democracy or women’s rights either, for that matter. These ideas come from Liberalism, which came from the Enlightenment. Modern day CONservatism is certainly not about conserving–can you name anything?–it is about promoting confidence, as in a (con)fidence game. As in, “I’m confident the media is liberal.”
Ooops.
Funny how so many people still aren’t fully putting it together that they were used by the “Con”servative movement. It was fascism in a different dress, sorry. Red, White & Blue Corporatism. Might Makes Right. Very un-American. It’s difficult to see how it can get better without a change in thinking back to either a traditionally liberal mindset of the populace, ie, We the People, or to something else that actually works to bring a better life to humanity (which has never been found yet, unless the corp-sponsored “Think Tanks” come up with something.)
The reason for my tempered rant (trust me) is that I am a new author, who incidentally writes about history and its lessons, and my experience with the publishing industry is that their working dream is to make books into a commodity. Like potatoes, you know, or Health Care or Education. Everything is to be made into potatoes for the ease of the merchant. Having the author hawk his own wares is a good joke on the sorry bastards, not to mention readers and humanity–but this insanity is never questioned by those with clout, only dictated. Sorry if a talented writer isn’t a talented marketer. Priorities, people: Profit is the god of all now, everything must pay within the short-term confines of a corporate earnings statement, and all human needs and conscience has been monetized or put to the knife.
So many not only watched this, but chuckled knowingly to themselves about the “losers” not getting the joke. Well the punch line has started, with more knockout blows coming.
The solution is to realize that NOT everyone in this world is motivated by making money, and that this is a good thing to be valued and honored, not to be mocked and starved in favor of the merchantly-minded. Instead, the publishing industry consolidated and played corporate games for decades while literacy and readership died. The vaunted gatekeepers kept their smooching lips pursed upwards to the Butts of the Wealthy and sipped at the smothering trickle-down as it flowed over the actual artists trapped below … *hey that was fun to write.*
There is a real purpose and value to publishing, and also a responsibility that has been abdicated. I come to read the Contrarian posts because they often seem to be from someone who saw through the bullcrap and realized authors and indys were the hope for the future, and was willing to kick off the harness and try some new things. If that assessment was true, we have certainly not heard the last of the Publishing Contrarian.
December 6th, 2008 at 1:08 pm
I think you are being irrational for blaming the broker, who did what everyone else did and followed the party line. The Harvard U. trust has lost a huge amount. Everyone , with a few exceptions, was wrong, and there are always some people who are right, through no fault of there own. Jut as there are always people predicting the end of the world and the return of of J. Christ (of biblical fame).
Note from the Wicked Witch of Publishing (TM): Sorry, I’m not buying it. I expect more from professionals who accept the responsibility of handling other people’s money and to whom a premium is paid. But, again, maybe it will all turn out just fine once we ride out this “cycle.”
December 6th, 2008 at 2:20 pm
I do not know this as a fact, but I am willing to bet that the all-knowing one, the great Alec Baldwin, also lost a significant amount of money recently. If so, you are in the company of the cognoscenti of the Hamptons.
December 6th, 2008 at 2:46 pm
I’m interested in what this says about the mainstream publishing industry. You found one book a few years ago that made sense to you - and it was self-published. You asked an expert recently if there was a book out there for you and he said he didn’t know of one. A zillion books on the market but not one you can use.
Well, I suspect there may be useful books on the topic, but it’s likely they come from the wretched self-published/POD universe. This means that for promotional tools they only have word of mouth and blog chatter, so even the best get little attention. Consideration of POD books in the mainstream media is pretty much verboten. (Of course, they first feel obligated to plow through all the ‘published’ books, and POD does feature a high rate of crap, but still……)
I now cleverly cite as an example my insider’s look at nuclear power. Mainstream publishers churn out stuff on the topic by the well-connected that is mostly propoganda by one side or the other. I didn’t have those connections when trying to publish, so while my entertaining look at the good and bad of nuclear is on Amazon and also has many positive comments at the website, there’s no buzz on it. Meanwhile, news and commentators continue to cite studies and deep thoughts on the topic by people with no practical experience.
I think you covered some of what this implies about the modern publishing industry in your posting: http://www.thepublishingcontrarian.com/2007/01/10/mystery-entrepreneur-offers-advice-to-independent-bookstore-owners-future-boils-down-to-one-question/
December 6th, 2008 at 4:04 pm
Are you saying that Steve Selengut was your financial adviser, too?
December 6th, 2008 at 5:59 pm
Interesting that you mentioned Neil Ferguson. He was giving a breakfast lecture at the Carnegie Council of Ethics and International Affairs in NYC 2 weeks ago.
Unfortunately I had to leave for a meeting before he finished, but he was rather optimistic. He claims that this country can handle a large deficit - and should, to cure the mess we’re in. He says that we can afford to bail out banks etc. and quoted forgettable percentages, but that the European governments are too small and the debts too large, and they will be in far worse trouble. Job’s comfort, when nothing seems to be working, the banks aren’t lending, and so on, but let’s hope he’s right.
The conventional wisdom used to be that for the long haul equity investments were the best way to grow wealth, but in this recession, who knows. However, today’s NY Times promotes buying into financial companies now.
I’ve lost plenty but am hanging onto my beaten-down stocks.
December 7th, 2008 at 12:00 pm
Lynne– What a coincidence! Just a few months ago, a well-thumbed copy of The Brainwashing of the American Investor — The Book that Wall Street Does Not Want You to Read! was given to me by a friend who shares some of my doubts about Wall Streeters generally, but who thought there were some good ideas in this book (as you did, five years ago).
Fortunately though, my financial paranoia, largely acquired through observing stock market machinations in recent years, saved me from believing a word of Mr. Selengut’s book. First, I was put off by its title . . . isn’t it obvious by now that “Wall Street” DOES want us to read, absorb and act on any information or misinformation that encourages to invest in anything that’s commissionable?
Then I dipped into the book and found it to be a badly written, poorly edited, cleverly rearranged pile of tripe taken from 100 or so other how-to-invest books. What a brainwashing job it is itself!
Note from the Wicked Witch of Publishing (TM): No, I don’t think Steve is ill-intentioned. In fact, his book does take on established Wall Street. And, yes, the original book — the one I was sent — was badly in need of a new cover, new title, and serious editing. (Welcome to the world of self-publishing!) Still, I was able to nose around the text and dig out an actual methodology that I could understand. The book also included information about when to sell: DON’T HOLD A STOCK FOR MORE THAN A YEAR IF IT IS NOT PERFORMING and BETTER YET, SELL IT AFTER SIX MONTHS. IF THE STOCK IS DOWNGRADED, HIGHTAIL IT. IF IT STOPS PAYING DIVIDENDS, RUN. What you want is a financial adviser who follows his own advice! The lame “Don’t look back” response by the broker may work for the broker, but it doesn’t work for the investor who has to rate performance and factor in liquidation value at any given time.
December 7th, 2008 at 12:02 pm
Lynne,
Interesting that you should mention Michael Lewis (author of, among others books, “Liar’s Poker” and “Moneyball.” I heard him interviewed on NPR just yesterday evening. Not only is the guy fabulously articulate, he’s also got a great sense of humor.
He just came out with “Panic: the Story of Modern Financial Insanity,” in which he demonstrates some spot-on insight into why we’re in the mess we’re in. I’m only sorry that it’s coming out too late to help you save your nest-egg. Perhaps you can at least use the book to beat your broker about the shoulders (as I assume he lost his head along with all of the others some time ago).
Russell
December 7th, 2008 at 5:51 pm
Hi, Lynne:
Today’s NY Times online is fully feathered with informative articles, most of course with powerful hindsight, and as I think about it, none with foresight. But it still feels good to sit in the pit of our modern day Globe Theater and throw rotten food at the actors on the stage. Here is a quote from the editorial section:
‘For some of J.F.K.’s best and brightest, Halberstam wrote, wisdom came “after Vietnam.”
We have to hope that wisdom is coming to Summers and Geithner as they struggle with our financial Tet. Clearly it has not come to Rubin. Asked by The Times in April if he’d made any mistakes at Citigroup, he sounded as self-deluded as McNamara in retirement.
“I honestly don’t know,” Rubin answered. “In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.” Since that interview, 52,000 Citigroup employees have been laid off but not Rubin, who remains remorseless, collecting a salary that has totaled in excess of $115 million since 1999.
You may be touched to hear that he is voluntarily relinquishing his bonus this Christmas.
Rubin hasn’t been seen in a transition photo op since Nov. 7, and in the end Obama chose Paul Volcker as chairman of his Economic Recovery Advisory Board. This was a presidential decision not only bright but wise.’
Hope you are OK. Back to my reading.
December 12th, 2008 at 3:14 pm
Sounds like you fired Steve Selengut a little too late.
December 13th, 2008 at 9:26 am
Quote of the Day
“All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies”
- Warren Buffett
December 22nd, 2008 at 6:11 pm
Lynn,
I feel your pain. A lot of people feel your pain. Here’s a great video that explains a lot in 10 minutes. Peter Schiff, whom I do not know, was warning everyone 2-3 years ago about the impending crash and most of the experts literally laughed at him (you’ll see them laughing in the video). After watching this, I recalled my grandfather saying he didn’t trust bankers or brokers. Now I know why.
http://lhote.blogspot.com/2008/11/peter-schiff-vindicated.html
December 29th, 2008 at 2:40 pm
Hi Lynne,
I read your article and our firm, as many others, got frozen out when the securitizations ended. Financial credits markets are still frozen as commercial banks are using TARP money for their reserves and takeovers rather than disbursement into the marketplace. 2009 will see tremendous defaults in the commerciall real estate market as most loan interest reserves will run out and properties will not be able to make their pro-formas.. thus commercial real estate developers are now also seeking bailout money which if provided by the government will also be ultimately paid back to the banks which will then too be placed into bank reserves and still frozen..
I am now looking for another job .. any thoughts.
December 29th, 2008 at 2:43 pm
I do not have a car. lost my Mercedes station wagon, then private school, then home….my daughter is in school, need to stay in city, but the dog may not be allowed, tha’ts the issue i need to prepare for. my daughter holds importance over my darling dog.
I am trying to survive losing everything…